Brady Gailey: Okay. All right, great. Thanks for the color, guys.
Operator: Our next questions are from the line of Matt Olney with Stephens. Please proceed with your questions.
Matt Olney: Hey, thanks. Good morning. I just want to go back to the discussion around the NII and the NIM outlook. It seems like we’ve been talking about stabilization for a while, but the results continue to erode lower. I think investors are looking for more details as far as the outlook here. So, in the fourth quarter, the NIM was, call it, $249 million, and the NII was $106 0.3 million. Can you be more specific about your near-term expectations? And we talk about stabilization and inflection. I think those terms can be kind of used loosely sometimes. So, any more details you can provide on both the NII and the NIM in the first quarter? Thanks.
Paul Langdale: Sure, Matt. Happy to give you a little bit more color on that. As we look at our modeling, the multiple scenarios that we show in both flat and down rate environments, and we model three scenarios specifically. We model the flat rate environment. We model the forward curve, and we model the Fed’s summary of economic projections. And as we talked through those in our ALCO, all of those three scenarios show us growing NIM by five to seven basis points in the first quarter. From there, that growth accelerates to where we can get back to, call it, a 3% NIM by the end of 2024, and then as we mentioned, back to a 3.5 NIM by the end of 25. So, that’s our target, and that’s really what we’re focused on. As I mentioned, again, I mean, we’ve moved a lot of pieces around on the balance sheet in the fourth quarter to enhance our liability sensitivity and capture that upside of down rate environments.
So, we wanted to make sure that we were optimally positioned to recapture the earnings that we lost on the way up for rates when rates come back down. And so, that’s more of just a modifier from the flat rate scenario where we’re still going to grow NIM, starting, as I said, by five to seven basis points and then forward accelerating over the back half of the year.
Matt Olney: Okay, that’s helpful, Paul. Thank you for that. And I guess if the NIM is going to move higher in the first quarter, I would assume that on a monthly basis, the NIM has already inflected at some point late in the fourth quarter. Is that a reasonable assumption? Any color there?
Paul Langdale: That is a reasonable assumption.
Matt Olney: Okay, perfect. Thanks. And then I guess switching gears, on the expense side, I think you gave us the $85 million, $86 million outlook from here, a touch higher than what we’ve seen over the last few quarters as far as expectations. Anything to call out there?
Paul Langdale: Just the normal first quarter expenses are generally higher for us. We have obviously merit and bonus season. As we think about some investments that we have to make, obviously, Matt, we’ll remain focused really on expense discipline, and we’ll be mindful of trying to find any offsets we can to where we have expense increases. That’s something, Matt, as you know, has been a focus of ours for really the last six quarters, and that’s something that we’re going to remain focused on in 2024.
Matt Olney: And just to clarify, the $85 million to $86 million, that’s a guidance or a goal for the next several quarters. Did I catch that right, or is that just the first quarter?
Paul Langdale: Yes, that’s my expectation, really around 85 million for the next several quarters.
Matt Olney: Perfect. Thanks, guys.
Operator: Thank you. Our next question comes from the line of Michael Rose with Raymond James. Please proceed with your questions.
Michael Rose: Hey, good morning, everyone. Thanks for taking my questions. Maybe for Dan, I just wanted to get some color on the CRE credit this quarter and what the resolution could potentially look like there. And then I was also just curious as to why some of the OREO loss flowed through fee income as opposed to charge-offs. Would just like some clarification there. Thanks.
Dan Brooks: So, good morning, Michael. This is Dan. The credit that we moved to non-accrual, which I’m assuming is what you’re asking about was one property in Houston, and that has been – excuse me, that loan remains current and the owners are preparing to sell that asset, and we just felt like it was in a position that there might be a slight loss on it. So, we just positioned it for that. But we expect that’ll be resolved sometime here in the first part of the year. And as it relates to …
Paul Langdale: As it pertains to the accounting treatment, Michael, we’ve always taken OREO expenses and income into non-interest income and non-interest expense, respectively. We’ve recently moved, I think I noted on the third quarter call, OREO income and expense to offset each other into non-interest expense. But when we book a gain or a loss on sale, we put that through the fee line, consistent with what our auditors and what our internal accounting teams feel is the appropriate accounting treatment.
Michael Rose: Okay, that’s helpful. And then maybe just, I know we’ve probably beaten the margin questions a lot here, but just to kind of follow up on that, what does your kind of baseline forecast include in terms of cuts for this year? And I guess the step up from here to kind of what you talked about, I guess for mid to late next year in the mid 350s, 360s, is a really big ramp, and I think it’s going to be probably difficult for some investors to kind of see. So, can you kind of just give us the – help us with the bridge to kind of get there and kind of what really needs to go right? And if your baseline scenario isn’t correct, what could that range look like if we’re higher for longer, for instance, or you have more growth and you have to fund it with higher cost deposits kind of et cetera? Just looking for a kind of a bear-bull base kind of case for the margin. Thanks.
